The financial measures presented are consistent with the Company’s historical financial reporting practices. The non-GAAP financial measures presented herein may not be comparable to similarly titled measures presented by other companies and are not identical to corresponding measures used in other various agreements or public filings.Investor Contacts: IMS Investor RelationsLoyalty Ventures Inc. Investor Relations Linejnesbett@imsinvestorrelations.cominvestorrelations@loyalty.com+1.203.972.9200+1.972.338.4505 LOYALTY VENTURES INC.
UNAUDITED CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 (in thousands, except per share amounts)Revenues Redemption, net $91,852 $97,149 $273,779 $280,844 Services 62,757 65,806 191,830 199,244 Other 7,760 6,302 23,508 16,628 Total revenue 162,369 169,257 489,117 496,716 Operating expenses Cost of operations (exclusive of depreciation and amortization disclosed separately below) 133,905 119,882 407,890 372,820 General and administrative 5,090 4,018 15,907 11,608 Depreciation and other amortization 7,409 8,665 25,146 26,237 Amortization of purchased intangibles 259 433 820 1,316 Goodwill impairment — — 422,922 — Total operating expenses 146,663 132,998 872,685 411,981 Operating income (loss) 15,706 36,259 (383,568) 84,735 Interest expense (income), net 11,527 (136) 29,973 (318)Income (loss) before income taxes and income from investment in unconsolidated subsidiary 4,179 36,395 (413,541) 85,053 Provision for income taxes 4,304 16,542 27,466 31,616 Income from investment in unconsolidated subsidiary – related party, net of tax — (4,108) — (4,067)Net (loss) income $(125) $23,961 $(441,007) $57,504 Net (loss) income per share: Basic $(0.01) $0.97 $(17.92) $2.34 Diluted $(0.01) $0.97 $(17.92) $2.34 Weighted average shares: Basic 24,612 24,585 24,607 24,585 Diluted 24,612 24,585 24,607 24,585 LOYALTY VENTURES INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2022 2021 (in thousands, except per share amounts)ASSETS Cash and cash equivalents $73,307 $167,601 Accounts receivable, net 245,863 288,251 Inventories, net 236,776 188,577 Redemption settlement assets, restricted 609,711 735,131 Other current assets 23,415 28,627 Total current assets 1,189,072 1,408,187 Property and equipment, net 63,742 79,959 Right of use assets - operating 85,057 99,515 Deferred tax asset, net 48,388 58,128 Intangible assets, net 1,913 3,095 Goodwill 177,978 649,958 Other non-current assets 25,068 24,885 Total assets $1,591,218 $2,323,727 LIABILITIES AND EQUITY (DEFICIENCY) Accounts payable $116,766 $103,482 Accrued expenses 131,242 144,997 Deferred revenue 791,208 924,789 Current operating lease liabilities 8,086 10,055 Current debt 50,625 50,625 Other current liabilities 120,651 118,444 Total current liabilities 1,218,578 1,352,392 Deferred revenue 87,793 97,167 Long-term operating lease liabilities 88,390 103,242 Long-term debt 567,720 603,488 Other liabilities 18,369 20,874 Total liabilities 1,980,850 2,177,163 Common stock, $0.01 par value; authorized, 200,000 shares; issued, 24,612 shares and 24,585 shares at September 30, 2022 and December 31, 2021, respectively 246 246 Additional paid-in-capital 272,487 266,775 Accumulated deficit (496,390) (55,383)Accumulated other comprehensive loss (165,975) (65,074)Total (deficiency) equity (389,632) 146,564 Total liabilities and (deficiency) equity $1,591,218 $2,323,727 LOYALTY VENTURES INC.
UNAUDITED CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2022 2021 (in thousands)CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $(441,007) $57,504 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 25,966 27,553 Deferred income taxes 5,192 (3,594)Non-cash stock compensation 5,248 6,322 Goodwill impairment 422,922 — Gain on sale of investment in unconsolidated subsidiary – related party — (4,110)Change in other operating assets and liabilities (90,673) 19,511 Other 20,798 10,539 Net cash (used in) provided by operating activities (51,554) 113,725 CASH FLOWS FROM INVESTING ACTIVITIES: Change in redemption settlement assets, restricted 10,313 (47,312)Capital expenditures (15,936) (13,137)Distributions from investment in unconsolidated subsidiary – related party — 795 Sale of investment in unconsolidated subsidiary – related party — 4,055 Net cash used in investing activities (5,623) (55,599) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under debt agreements 12,000 — Repayments of borrowings (49,969) — Payment of deferred financing costs (1,964) — Dividends paid to former Parent — (120,000)Net transfers to former Parent — (9,278)Net transfers from former Parent for Separation-related transactions 1,569 — Other (557) — Net cash used in financing activities (38,921) (129,278) Effect of exchange rate changes on cash, cash equivalents and restricted cash (13,195) (4,000) Change in cash, cash equivalents and restricted cash (109,293) (75,152)Cash, cash equivalents and restricted cash at beginning of year 232,602 337,525 Cash, cash equivalents and restricted cash at end of year $123,309 $262,373 LOYALTY VENTURES INC.
UNAUDITED SUMMARY OF FINANCIAL HIGHLIGHTS
Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 % Change 2022 2021 % Change (in thousands, except percentages)Segment Revenue: AIR MILES Reward Program $67,387 $71,928 (6)% $199,649 $214,123 (7)%BrandLoyalty 95,024 97,329 (2) 289,597 282,593 2 Corporate/Other — — — — — — Eliminations (42) — nm* (129) — nm* Total $162,369 $169,257 (4)% $489,117 $496,716 (2)% Segment Adjusted EBITDA: AIR MILES Reward Program $34,734 $40,478 (14)% $95,715 $113,685 (16)%BrandLoyalty 102 10,622 (99) (112) 15,220 (101)Corporate/Other (1,753) (3,600) (51) (10,374) (10,295) 1 Total $33,083 $47,500 (30)% $85,229 $118,610 (28)% Key Performance Indicators (in millions): AIR MILES reward miles issued 1,176.8 1,155.2 2% 3,470.0 3,406.1 2%AIR MILES reward miles redeemed 1,294.9 895.8 45% 3,584.8 2,435.5 47%
* not meaningful LOYALTY VENTURES INC.
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Three Months Ended Nine Months Ended September 30, September 30, 2022
2021
2022
2021
(in thousands) Adjusted EBITDA: Net (loss) income $(125) $23,961 $(441,007) $57,504 Income from investment in unconsolidated subsidiary – related party, net of tax — (4,108) — (4,067)Provision for income taxes 4,304 16,542 27,466 31,616 Interest expense (income), net 11,527 (136) 29,973 (318)Depreciation and other amortization 7,409 8,665 25,146 26,237 Amortization of purchased intangibles 259 433 820 1,316 Stock compensation expense 1,339 2,143 5,248 6,322 Goodwill impairment — — 422,922 — Strategic transaction costs(1) 3,015 — 5,040 — Restructuring and other charges(2) 5,355 — 9,621 — Adjusted EBITDA $33,083 $47,500 $85,229 $118,610
(1) Represents costs associated with the Separation, which were comprised of amounts associated with the Employee Matters Agreement and Tax Matters Agreement. Strategic transaction costs also include advisory services associated with modifying the credit agreement and the capital structure.
(2) Represents costs associated with termination benefits, asset impairments and other exit costs.